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Trade Credit Insurance

Trade credit insurance insures manufacturers, traders and providers of services against the risk that their buyer does not pay (after bankruptcy or insolvency) or pays very late.

The trade credit insurance policy will pay out a percentage of the outstanding debt. This percentage usually ranges from 75% to 95% of the invoice amount, but may be higher or lower depending on the type of cover that was purchased.

In the absence of trade credit insurance many trade transactions would have to be done on a pre-paid or cash basis, or not at all. It is an essential credit management tool and used to control risks, improve payment behaviour, obtain vital buyer information, and monitor exposures.

Where is TCI available?

Here is an overview of countries where ICISA’s trade credit insurance and surety members offer their products. Click on each picture to see it on better resolution.

Glossary of TCI terms

Trade credit insurance protects businesses against the risk that customers’ are unable to pay for products or services. This can be because of bankruptcy, insolvency, or political upheaval abroad.


Below you will find frequently asked questions on TCI related topics. If you have any additional questions please feel free to contact

Trade credit insurance insures suppliers against the risk of non-payment of goods or services by their buyers. This may be a buyer situated in the same country as the supplier (domestic risk) or a buyer situated in another country (export risk). The insurance covers non-payment as a result of insolvency of the buyer or non-payment after an agreed number of months after due-date (often referred to as protracted default). It may also insure the risk of non-payment following an event outside the control of the buyer or the seller (political risk cover), for example the risk that money cannot be transferred from one country to another.

This usually applies to large or complex contracts, although single transaction cover also occurs in other circumstances. This type of cover is particularly useful for companies that deal with only one buyer or that have very few transactions.

Payment from a buyer can be obstructed as a result of strikes, protests, or other civil unrest. With a trade credit insurance policy that includes the cover of political risks, not getting paid as a result of these occurrences can be avoided.

Buyers sometimes opt for a bankruptcy protection arrangement, also known as Chapter 11 in the USA and under different names in other jurisdictions. Such an arrangement allows the buyer to delay payments for an extended period. This occurrence is considered to be an insolvency and is covered under a credit insurance policy.

A change in government in the country of the buyer, may lead to a change in politics. In case the buyer is nationalised, his payment obligation may be subsequently cancelled. Payment can be assured through political risk cover.

The risk or the inability to transfer money from one country to another, and therefore for not getting paid can be insured under so-called political risk cover.

Trade credit insurance policies are drafted to suit your needs. This makes them unique for each customer. A trade credit insurer will always investigate your particular circumstances and wishes. The result is a custom made policy at a corresponding affordable premium. Most trade credit insurers also offer standard policies, which may be more suitable depending on the trade to be insured. Many trade credit insurers have developed particular policies aimed at small and medium sized enterprises (SME). These policies have low administration, and are competitively priced.

All trade credit insurers offer information on their products through their websites. Often policy wording or non-binding quotes can also be obtained on-line. Custom made quotes and policies can be obtained either on-line or directly from the insurer. Brokers, in particular specialised brokers or brokers with a specialised trade credit insurance department, also offer non-binding indications upon request.

Insurers have different ways of insuring receivables. Policy holders can often choose smaller or larger risk sharing options. Policies that are currently offered can cover domestic sales as well as world-wide sales, depending on the wishes of the customer. Customers can often choose between insuring a single transaction or all their sales. All these factors influence the premium rate widely. Insurers offer a free quote without any obligation, either on-line or from dedicated sales staff.

Trade credit insurance is priced on the basis of standard actuarial techniques. It is sold mostly on a whole turnover basis (whole turnover cover policy) and premium rates are generally given as a percentage of the company’s turnover (including financially sound and weak customers). Obviously, the future turnover is not known at inception and so the premium is not known either. Therefore, a minimum premium amount is usually an integral part of the contract.

Multinationals want to benefit from their buying power. They look for seamless cover across borders, but with local service in local currency and local language. At the same time group exposures should be constantly monitored. Multinational trade credit insurance programmes are offered by many trade credit insurers and provide just that. These often include single wording with policies issued in different languages and/or currencies to suit the needs of the different subsidiaries.

Trade credit insurance insures against the risk that a buyer does not pay. It can also cover the risk that a buyer pays very late. A buyer will not pay after he has been declared bankrupt, insolvent, or a similar legal status. Similarly buyers sometimes opt for a bankruptcy protection arrangement, which allows them to delay payments for an extended period. Both instances are covered under a trade credit insurance policy. Trade credit insurance policies can include a wider range of cover, depending on the circumstances. Some policies consider a delay in payment also to be an insolvency (so-called protracted default cover).  If a buyer does not pay, the trade credit insurance policy will pay out a percentage of the outstanding debt. This percentage usually ranges from 75% to 95% of the invoice amount, but may be higher or lower depending on the type of cover that was purchased.

Trade credit insurance policies are flexible and allow the policyholder to cover the entire portfolio or just the key accounts against corporate insolvency, bankruptcy and bad debts. The most common type of cover is so-called Whole Turnover Cover, which covers all buyers of the policyholder.

Many trade credit insurers offer policies aimed at small and medium sized enterprises (SMEs), which contain simple language, are competitively priced, and have low administration. Often these policies are available on-line, directly from the insurer.

The maximum liability amount is used to limit the loss that can be sustained through one single policy. If the total loss of a policy occurring in one year exceeds the amount of the agreed maximum liability, the actual loss for this policy is limited to this amount. The maximum liability is often defined as a multiple of the earned premiums in a given policy contract.

A whole turnover trade credit insurance policy includes all buyers and insures against non-payment. Because of the spread of risk, premium rates are usually competitive. The entire buyer portfolio is constantly being monitored, and suppliers are advised about the state of every buyer.

Policies that include this cover pay out if a buyer is late in paying, and payment is still due after a pre-determined period (usually 60 days after due date of the invoice). After this period the buyer is presumed to be insolvent. After claims payment the trade credit insurer becomes the owner of the debt.

There is no clear definition of what credit management is. It is usually regarded as assuring that buyers pay on time, credit costs are kept low, and poor debts are managed in such a manner that payment is received without damaging the relationship with that buyer. A trade credit insurance company does all that. Either directly or in conjunction with a company’s credit department. An approved credit management policy can offer assurances to a financing bank, which may facilitate financing.

Suppliers that deliver goods and/or services on credit will have to manage this credit risk to ensure that payment is received on time. Several tools come to the aid of today’s credit manager. These can be used as additional security to existing credit management procedures. If no procedures are in place, these tools can assist in setting these up.

One of the most important credit management tools is reliable up to date buyer information. A supplier only sees one side of his buyer. Independent information is essential for efficient credit management.

A buyer may be sound, but the country he is in may be experiencing problems. Country reports detect trends and alert exporters before serious problems arise in a particular country.

Suppliers need to manage their outstanding receivables. This can be done through complex financial solutions. Alternatively companies can insure against bad debts through a trade credit insurance policy, obtain detailed market intelligence, implement ledger management, factor, or seek professional help in recovering debts.

Our book: A guide to trade credit insurance

‘A Guide to Trade Credit Insurance’ is a reference book on trade credit insurance, written from an international perspective. It is a compilation of contributions from various authors and reviewers drawn from ICISA member companies.

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ICISA Secretariat
ICISA Secretariat
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